IBM, Or­a­cle to up sales as US law pushes com­puter track­ing

The Pak Banker - - Company& -

NEW YORK: Changes to U.S. food-safety rules may gen­er­ate sales for In­ter­na­tional Busi­ness Ma­chines Corp., Or­a­cle Corp. and other com­pa­nies that can pro­vide sys­tems to track out­breaks of food-borne ill­ness.

The U.S. House of Rep­re­sen­ta­tives on Dec. 21 and the Se­nate last month passed a bill in­struct­ing the U.S. Food and Drug Ad­min­is­tra­tion to es­tab­lish over the next two years how the track­ing is to be ac­com­plished. The study may lead to FDA re­quire­ments that farms and man­u­fac­tur­ers buy com­puter sys­tems to monitor and track ship­ments, ac­cord­ing to agri­cul­ture trade groups that have started work on track­ing technology.

The bill, which awaits Pres­i­dent Barack Obama's sig­na­ture, may lead to hun­dreds of mil­lions of dol­lars in an­nual sales for com­pa­nies that pro­duce the la­bels and scan­ning de­vices to en­able track­ing sys­tems, said Ray Con­nelly, gen­eral man­ager of closely held True­trac, a de­vel­oper of agri­cul­tural prod­uct-track­ing soft­ware in Sali­nas, Cal­i­for­nia.

"That's the free mar­ket," said Larry San­ders, a pro­fes­sor at Ok­la­homa State Uni­ver­sity's Depart­ment of Agri­cul­tural Eco­nom­ics in Still­wa­ter, Ok­la­homa. "The con­sumer is be­ing heard be­cause of the prob­lems we have been hav­ing be­cause of E. coli and sal­monella."

An es­ti­mated 76 mil­lion peo­ple con­tract food-borne ill­nesses in the U.S. each year, with 325,000 hos­pi­tal­iza­tions and 5,000 deaths, ac­cord­ing to the Cen­ters for Dis­ease Con­trol and Pre­ven­tion in At­lanta. Those ill­nesses cost the U.S. econ­omy $152 bil­lion a year in health care and re­lated ex­penses, a March re­port by Ge­orge­town Uni­ver­sity's Pro­duce Safety Project in Washington con­cluded.

Un­der a track­ing sys­tem, farm­ers would scan in­di­vid­ual cases of pro­duce, keep­ing records of where they are shipped and per­haps feed­ing the in­for­ma­tion to a third party that will man­age the data. If a re­call is or­dered by the FDA, the records would be quickly dis­sem­i­nated to trace the ori­gin of the re­called pro­duce and help farms and fac­to­ries ad­dress the cause of the prob­lem.

Larger farms that ship thou­sands of crates daily would pay thou­sands of dol­lars a year to en­sure their food can be traced, True­trac's Con­nelly said. With more than a bil­lion cases of food shipped an­nu­ally, the penny to 10 cents paid for each la­bel might add up to more than $100 mil­lion, he said.

New technology may not be needed. IBM al­ready of­fers sim­i­lar sys­tems to track phar­ma­ceu­ti­cal prod­ucts. In ad­di­tion, the food in­dus­try has been adopt­ing track­ing technology on its own, said Kathy Means, vice pres­i­dent of govern­ment re­la­tions for the Ne­wark, Delaware-based Pro­duce Mar­ket­ing As­so­ci­a­tion, which rep­re­sents 3,000 pro­duce­grow­ing and -dis­tri­bu­tion com­pa­nies.

The leg­is­la­tion would re­quire most food pro­duc­ers to de­velop haz­ard pre­ven­tion plans and would give the FDA ac­cess to those records when re­quested. Some lo­cal food pro­duc­ers with an­nual sales un­der $500,000 would be ex­empt from that rule un­der lan­guage writ­ten into the bill by Demo­cratic Sen­a­tor Jon Tester of Mon­tana, an or­ganic farmer.

The track­ing sys­tem might mir­ror one be­ing es­tab­lished in Cal­i­for­nia for phar­ma­ceu­ti­cals, said Paul Chang, a food safety ex­pert for Ar­monk, New York­based IBM. By 2017, all drugs sold in Cal­i­for­nia will need to be trace­able, said Vir­ginia Harold, the ex­ec­u­tive of­fi­cer of the state's Board of Phar­macy.

"It is ex­pen­sive, but so is it for a con­sumer who walks into a phar­macy and ends up get­ting a counterfeit prod­uct," said Harold. She de­clined to es­ti­mate the technology's costs.

Those costs would de­cline as trac­ing is more widely adopted, said IBM's Chang, who has met with FDA rep­re­sen­ta­tives to dis­cuss the food safety bill's re­quire­ments. "Once you de­velop a process, it can be copied and pasted," he said.

Or­a­cle, based in Red­wood City, Cal­i­for­nia, has used ex­ist­ing technology for phar­ma­ceu­ti­cals, though not for food track­ing, ac­cord­ing to in­for­ma­tion on the com­pany's web­site. Or­a­cle spokesman Deb­o­rah Hellinger de­clined to com­ment on the com­pany's food safety op­por­tu­ni­ties.

With in­di­vid­ual farms and man­u­fac­tur­ers adopt­ing such technology al­ready, the in­dus­try "is al­most cer­tain" to be in com­pli­ance with the rules by the time the FDA pro­poses them in two years, said Vic­to­ria Salin, a pro­fes­sor in Texas A&M Uni­ver­sity's depart­ment of agri­cul­tural eco­nom­ics in Col­lege Sta­tion, Texas. "The only dif­fi­culty will be if the fed­eral stan­dards are dif­fer­ent."

In Cal­i­for­nia, 99 per­cent of farm­ers and han­dlers have com­mit­ted to sell prod­ucts that com­ply with vol­un­tary food safety prac­tices, in­clud­ing records of where pro­duce was grown and where it was shipped. Cal­i­for­nia grow­ers of leafy green veg­eta­bles such as spinach, who also agreed to ex­ten­sive wa­ter test­ing and en­vi­ron­men­tal as­sess­ments, say the ef­fort more than dou­bled their food safety costs to $54.63 an acre, ac­cord­ing to a Septem­ber 2009 re­port from the Small Farm Pro­gram of the Uni­ver­sity of Cal­i­for­nia at Davis. The study doesn't break out how much went di­rectly to the trac­ing technology costs.

Un­der a 2007 agree­ment, Cal­i­for­nia farm­ers keep track of where pro­duce is shipped and can dis­close that in­for­ma­tion within 24 hours if it's needed, Salin said.

Farm­ers view the food safety technology they have so far de­ployed as the cost of do­ing busi­ness in an evolv­ing mar­ket­place, said Salin. The ini­tial in­vest­ment, she said, pales com­pared with the cost of busi­ness lost when food-borne ill­nesses di­min­ish con­sumer de­mand for pro­duce from farms far re­moved from the out­break. While farm­ers sup­port the abil­ity to put out a safer prod­uct, there are con­cerns of ex­cess govern­ment con­trol as the de­tails are sorted out, said Ray Bjork­lund, se­nior vice pres­i­dent of FedSources, a Washington-based con­sult­ing firm. -Bloomberg

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